UK DMO UPDATE: Remit revision due tomorrow
Apr-22 11:00
- An updated gilt remit is expected tomorrow following the release of the UK public sector finance data which will confirm the CGNCR outturn for 2024/25. There is an expected release time of 7:30BST (this is not confirmed but is the precedent set in previous years).
- Expectations are for an upward revision to the FY25/26 remit but most of the analyst notes we have seen on this are non-specific in terms of the numbers. We have only seen three estimates with numbers on from the sell side: Lloyds and Citi look for around GBP10bln (although Lloyds looks for this to be in bills rather than gilts, while Citi looks for it in gilts). Deutsche Bank looks for GBP10-15bln with a point estimate of GBP12bln but run three scenarios which see risks range from GBP8.7-17.9bln; Deutsche sees the revision being in gilts but see "some meaningful risk" of a GBP2bln increase UKTBs.
- We think that the bar to increasing linker issuance is relatively high. Anything up to around GBP10.6bln could be achieved by increasing the number of short, medium and long conventional auctions by one (and maintaining the current average sizes). An increase of GBP8.5bln could be achieved without an extra long auction.
- We think there is also the potential to add more to UKTB issuance, too, as demand may well increase as reserves become more scarce as QT continues and the TFSME continues to wind down. The DMO may prefer to add a little to UKTB issuance rather than increase long-dated issuance.
- And the wildcard is there is also more flexibility in the unallocated bucket given programmatic gilt tenders.
- For reference last year's remit revision was GBP12.4bln (all in gilts, no UKTB change) comprised of:
- GBP5.4bln of additional shorts with one extra auction
- GBP3.9bln of additional mediums with one extra auction
- GBP1.0bln of additional longs with one extra auction
- GBP1.1bln of additional linkers with one extra auction
- GBP1.0bln of additional unallocated
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US TSYS: Available "Extraordinary Measures" Pick Up Slightly From Lows
Mar-21 21:00
Treasury has $163B of "extraordinary measures" remaining for authorities to use to fend off hitting the debt limit as of March 19, per the latest release of Treasury data. That's up from $86B on Mar 17 and a low of $34B on Feb 24.
- That's a little under half of the $377B in measures available to Treasury, with most of the amount remaining ($143B) coming from the so-called "G Fund".
- This headroom is in addition to $416B in cash left in the TGA, at last count.
- We haven't seen any changes recently to "x-dates" by when Treasury will run out of cash until the debt limit is lifted.
- Consensus still centers around late July/early August, but much will depend on April's major mid-month tax take. Treasury wrote to Congress last week that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
USDCAD TECHS: Short-Term Outlook Remains Bullish
Mar-21 21:00
- RES 4: 1.4793 High Feb 3 and key resistance
- RES 3: 1.4700 Round number resistance
- RES 2: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 1: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- PRICE: 1.4345 @ 16:27 GMT Mar 21
- SUP 1: 1.4242 Low Mar 6 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD is trading closer to its recent lows. The bull cycle that started Feb 14 remains intact and moving average studies remain in a bull-mode position, highlighting a dominant uptrend. Note that the latest pullback has exposed a near-term key support at 1.4242, the Mar 6 low. Clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. The bull trigger is 1.4543, the Mar 4 high.
US DATA: Current Account Deficit Set To Widen Further In Early 2025
Mar-21 20:37
The Q4 current account deficit reported this week was much smaller than expected at $303.9B ($330B consensus), unexpectedly narrowing from $310.3B in Q3.
- This came despite a widening of the net trade deficit to $250B (widest since Q2 2022), from $236B prior as the goods deficit jumped $17B on the quarter to $326B.
- Offsetting this however were a pickup in primary income (positive $2.3B, after two consecutive negative quarters) as reinvested earnings soared $38B to $42B, the highest in 4 quarters (which appears to account for most of the consensus miss, though offset by a $20B pullback in dividends/withdrawals). There was also a $3B increase in the services surplus and a $4B decline in the secondary income deficit.
- The Q4 current account shortfall came to 4.1% of GDP, slightly smaller than Q3's 4.2% - but still above the sub-4% levels for the preceding 8 quarters.
- Obviously trade is a sensitive topic in policy circles at present, and bump in the primary income account (which looks like a one-off) doesn't obscure the very large sustained trade deficit which looks to have expanded substantially in Q1 even if that's on the back of idiosyncratic factors such as gold imports/tariff front-running.
- January's goods and services trade deficit was $131.4B, representing a material jump from December's $98.1B and by far the largest monthly print in history. Next week we get February advance goods trade data - more in a separate note ("US OUTLOOK/OPINION: Macro Week Ahead: PCE Plus A Rare Flagging Of Trade Data").
